SHENZHEN CHIWAN WHARF HOLDINGS LIMITED THE ABSTRACT OF THE 2017 ANNUAL REPORT

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1 Stock Code: / Stock Name: Chiwan Wharf A / Chiwan Wharf B Public Announcement No.: SHENZHEN CHIWAN WHARF HOLDINGS LIMITED THE ABSTRACT OF THE 2017 ANNUAL REPORT I. Important information This Abstract is based on the full text of the Annual Report. In order for a full understanding of the operating results, financial condition and future development planning of the Company, investors are kindly reminded to read the full text carefully on the media designated by the China Securities Regulatory Commission. This Abstract is prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail. Non-standard auditor s opinion Preliminary plan for profit distribution to the common shareholders or turning the capital reserve into the share capital for the reporting period, which has been reviewed and approved at the board meeting Applicable Not applicable Share capital increase from the capital reserve Yes No Preliminary plan for profit distribution to the common shareholders for the reporting period which has been reviewed and approved at the board meeting: Based on the total shares of 644,763,730, a cash dividend of RMB13.19 (tax included) will be distributed to all the shareholders for every 10 shares that they hold. No bonus shares will be granted and no capital reserve will be turned into share capital. Preliminary plan for profit distribution to the preference shareholders for the reporting period which has been reviewed and approved at the board meeting II. Company profile 1. Stock profile Stock name Stock exchange Chiwan Wharf A, Chiwan Wharf B Shenzhen Stock Exchange Stock code , Contact information Company Secretary Securities Representative Name Wang Yongli Hu Jingjing & Chen Dan Office address 8/F, Chiwan Petroleum Building, Zhaoshang Street, Nanshan District, Shenzhen, PRC Fax Tel address cwh@szcwh.com cwh@szcwh.com 2. Brief introduction to the main business or products in the reporting period (1) The Company s main business scope and business models 1

2 The Company is principally engaged in the handling, warehousing and transportation of containers and bulk cargoes, as well as the provision of related services. The Company has 6 container berths and 7 bulk cargo berths in Chiwan Wharf (Shenzhen), 3 container berths in Mawan Wharf (Shenzhen) and 5 bulk cargo berths in Machong Wharf (Dongguan). The Company also has an investment in Laizhou Wharf in Shandong Province. (2) Development stage and seasonality of the industry, as well as the Company s position in the industry The port industry in which the Company competes is a basic industry in the national economy, with its development level tied to the macro economy and trade. Due to seasonal factors and a stronger endogenous driving force of growth, the world economy was on a track of relatively strong recovery during the reporting period, which resulted in a faster recovery of international trade and an uptick in growth of port throughput. The ports run by the Company have been considered hubs for container and bulk cargo carriers in the Pearl River Delta. The Company s market position and operating performance remained stable during the reporting period. 3. Accounting and financial highlights (1) Accounting and financial highlights for the past three years Does the Company adjust retrospectively or restate the accounting data of previous years? Yes No Item Increase/decrease of current year over last year Unit: RMB Operating revenues 2,456,218, ,381,483, % 2,342,495, ,495, ,376, % 521,390, before extraordinary gains and 497,361, ,198, % 520,784, losses Net cash flows from operating activities 1,162,281, ,121,032, % 1,231,610, Basic EPS (RMB/share) % Diluted EPS (RMB/share) % Weighted average ROE (%) 10.45% 11.57% -1.12% 12.20% Item As of 31 Dec As of 31 Dec Increase/decrease of current year-end than last year-end 2015 As of 31 Dec Total assets 7,975,470, ,792,570, % 8,186,131, Net assets attributable to 4,922,969, ,736,680, % 4,474,942, Business mergers under the same control have caused retrospective adjustments or restatements, which are shown in the table below. For further information, see (3) YoY changes in the consolidation scope under 8. Issues related to the financial report under III. Performance discussion and analysis in this Abstract. 2

3 Unit: RMB 2016 Increase/dec rease of current year 2015 Item 2017 over last year Before After Before After After adjustment adjustment adjustment adjustment adjustment Operating revenues (RMB) 2,456,218, ,905,107, ,381,483, % 1,872,608, ,342,495, ,495, ,376, ,376, % 527,751, ,390, (RMB) before extraordinary gains and losses (RMB) 497,361, ,615, ,198, % 528,043, ,784, Net cash flows from operating activities (RMB) 1,162,281, ,754, ,121,032, % 977,850, ,231,610, Basic EPS (RMB/share) % Diluted EPS (RMB/share) % Weighted average ROE (%) 10.45% 11.64% 11.57% -1.12% 12.34% 12.20% Increase/dec rease of current As of 31 Dec As of 31 Dec. year-end As of 31 Dec than last year-end Before adjustment After After Before After adjustment adjustment adjustment adjustment Total assets (RMB) 7,975,470, ,620,476, ,792,570, % 6,913,772, ,186,131, Net assets attributable to (RMB) 4,922,969, ,709,815, ,736,680, % 4,439,600, ,474,942, (2) Accounting highlights by quarter Item Q1 Q2 Q3 Q4 Unit: RMB Operating revenues 590,462, ,188, ,261, ,306, ,193, ,867, ,362, ,071, before 137,529, ,082, ,375, ,375, extraordinary gains and losses Net cash flows from operating activities 327,701, ,854, ,832, ,893, The financial indicators above or their summations differ from those which had been disclosed in quarterly or semi-annual reports because they have been retrospectively adjusted as a result of business mergers under the same control. 3

4 4. Share capital and shareholders (1) Numbers of the common shareholders and the preference shareholders with resumed voting rights as well as the shareholdings of the top 10 shareholders Unit: share Total number of common shareholders at period-end 35,592, including 25,133A-shareholde rs and 10,459 B-shareholders Total number of common shareholders at previous month-end of this Report s disclosure 35,592, including 25,133A-shareh olders and 10,459 B-shareholders Total number of preference shareholders with resumed voting rights at period-end (if any) 5% greater shareholders or top 10 shareholders Total number of preference shareholders with resumed voting 0 rights at previous month-end of this Report s disclosure (if any) 0 Name of shareholder Nature of shareholder Sharehold ing percentag e Total shares held at period-end +/- in reporting period Number of restricted shares held Number of non-restricted shares held Pledged or frozen shares CHINA NANSHAN State-owned DEVELOPMENT (GROUP) INC. Common SHENZHEN MALAI domestic STORAGE CO., LTD. KEEN FIELD Foreign ENTERPRISES LIMITED CMBLSA RE FTIF TEMPLETON Foreign ASIAN GRW FD GTI 5496 CITIC SECURITIES CO., LTD NORGES BANK VANGUARD EMERGING MARKETS STOCK INDEX FUND MAI SHUQING CHINA MERCHANTS SECURITIES (HK) CO., LTD. CANADA POST CORPORATION REGISTERED PENSION PLAN Common domestic Foreign Foreign Domestic individual Foreign Foreign Name of shareholder 32.52% 209,687, ,687, % 161,190, ,190, % 55,314, ,314,208 Unknown 7.43% 47,914, ,914,954 Unknown 1.47% 9,467, ,467, % 2,802,863 1,142, ,802,863 Unknown 0.41% 2,617, ,617,518 Unknown 0.35% 2,238,347 1,908, ,238, % 2,126, , ,126,022 Unknown 0.24% 1,579,096-52, ,579,096 Unknown Top 10 non-restricted shareholders Number of non-restricted shares held at period-end Type Type of shares Number CHINA NANSHAN DEVELOPMENT (GROUP) INC. 209,687,067 A share 209,687,067 SHENZHEN MALAI STORAGE CO., LTD. 161,190,933 A share 161,190,933 KEEN FIELD ENTERPRISES LIMITED 55,314,208 B share 55,314,208 CMBLSA RE FTIF TEMPLETON ASIAN GRW FD GTI 47,914,954 B share 47,914,954 4

5 5496 CITIC SECURITIES CO., LTD 9,467,951 A share 9,467,951 NORGES BANK 2,802,863 B share 2,802,863 VANGUARD EMERGING MARKETS STOCK INDEX FUND 2,617,518 B share 2,617,518 MAI SHUQING 2,238,347 A share 2,238,347 CHINA MERCHANTS SECURITIES (HK) CO., LTD. 2,126,022 B share 2,126,022 CANADA POST CORPORATION REGISTERED PENSION PLAN 1,579,096 B share 1,579,096 China Merchants Port Holdings Company Limited ( CMPort ) is a Related or acting-in-concert parties among the top ten shareholder of China Nanshan Development (Group) Inc., and Shenzhen non-restrictedly tradable share holders and between the top Malai Storage Co., Ltd. and Keen Field Enterprises Limited are both ten non-restrictedly tradable share holders and the top ten wholly-funded subsidiaries of CMPort. Other than that, the Company shareholders does not know whether the other non-restricted shareholders are related parties or not. Top ten common shareholders conducting securities margin trading (if any) N/A (2) Number of the preference shareholders and the shareholdings of the top 10 of them No preference shareholders in the reporting period (3) Relationship between the Company and its actual controller in the form of diagram State-Owned Assets Supervision and Administration Commission of the State Council China Merchants Group 61.81% Entrusted to manage 32.52% shares held by CND Group Malai Storage China Merchants Port Holdings Company Limited Keen Field Enterprises 37.02% CND Group 25% 8.58% 32.52% Shenzhen Chiwan Wharf Holdings Limited 14.58% 19.32% Public Share A Public Share B Due to the planning and demonstration of China Merchants Group - the actual controller of the Company on major events related to the Company and through the application of the Company, the Company s stock was suspended from the market opening on 20 November Subsequently, upon the consultation and demonstration of related parties, the Company confirmed that the aforementioned major event constituted material asset reorganization. From the market opening on 4 December 2017, the Company s stock transferred to the material asset reorganization event and continued to be suspended. On 1 December 2017, the Company signed the Agreement of Intent for Reorganization with China Merchants Group (Hong Kong) Co., Ltd. regarding this 5

6 reorganization. The two parties of the Agreement reached the consensus on the intentional arrangements for the planned asset reorganization issue, and the relevant announcement (Announcement No.: No ) was published on Securities Times, Ta Kung Pao and on 27 January On 7 February 2018, the Company made the disclosure announcement by publishing the Summary of the Report for the Acquisition and the Simplified Report of Change in Equity on China Merchants Gangtong Development (Shenzhen) Co., Ltd. (CMGD) is a wholly-owned subsidiary of Broadford Global Limited (Broadford Global), which is controlled by China Merchants Group (H.K.) Limited (CMG Hong Kong). After the completion of the acquisition, CMGD and Broadford Global Limited hold a total of 370,878,000 A-shares and 55,314,208 B-shares of Shenzhen Chiwan, occupying 66.10% of the total issued capital stock of Shenzhen Chiwan (including A-shares of 57.52% and B-shares of 8.58%); CND Group, Malai Storage and KFEL no longer hold any share of Shenzhen Chiwan. The controlling shareholder of Shenzhen Chiwan has changed from China Merchants Port to CMGD with no change in the actual controller, which is still China Merchants Group. The ownership and controlling relationship between the actual controller of the Company and the Company is detailed as follows: State-Owned Assets Supervision and Administration Commission of the State Council China Merchants Group CMG Hong Kong Broadford Global Limited China Merchants Gangtong Development (Shenzhen) Co., Ltd. 8.58% 57.52% Shenzhen Chiwan Wharf Holdings Limited 14.58% 19.32% Public Share A Public Share B 5. Corporate bonds III. Performance discussion and analysis Investors are kindly reminded to read the full text of this Report carefully and pay special attention to the following risk factors: Any forward-looking statement such as those involving future plans or development strategies in this Report shall not be considered as virtual promises of the Company to investors. And investors are kindly reminded to pay attention to possible risks. Securities Times, Ta Kung Pao (HK) and have been designated by the Company for information disclosure. And all information about the Company shall be subject to what s disclosed on the aforesaid media. Investors are kindly reminded to pay attention to possible risks. Is the Company subject to any disclosure requirements for special industries? No. 6

7 1. Business review for the reporting period During 2017, the global economy grew at a faster pace, with higher international trade volumes and prices, as well as a basically stable financial market. China s economic growth reached 6.9% for the year as its supply-side structural reform boosted investment and export. The country s foreign trade was improving, with the total value coming to an end of the recent years negative growth and rebounding 14.2% over last year. As a result, the country s shipping market saw a general recovery, with faster growth in port throughput. According to the preliminary data of China s Ministry of Transport, the country s coastal ports above the designated size registered a cargo throughput of 8.63 billion metric tons, representing a year-over-year growth of 6.4% (3.2 percentage points higher than last year), and a container throughput of 0.21 billion TEU, up 7.7% from a year earlier (4.3 percentage points higher than last year). During the reporting period, the Company forged ahead, faithfully following the policy of Adhere to a Down-to-Earth Working Style and Focus on the Main Business for Development. All the business plans that the Company set out for the year have been implemented successfully, with the yearly cargo throughput reaching million tons, representing a steady year-over-year increase of 1.8%. (1) Container handling business A higher container shipping demand spurred by the recovery in international trade, the slowdown in growth in the worldwide shipping capacity and the slightly increased shipping rates brought better earnings to shipping companies. Mergers, restructuring and federalization were still taking place in the shipping sector. The three major shipping unions, namely, 2M, OCEAN and THE began running in April, which has caused adjustments to global shipping routes, as well as a more centralized market. During the reporting period, the combined container throughput of the ports of the three major cities in South China was million TEU, up 5.9% from last year, of which Shenzhen ports handled million TEU, a 5.3% year-over-year growth. With hub ports for containers in South China, the Company responded to changing shipping routes in an effective way by soliciting business from new routes and local sources to maintain stability in business. The Company handled a total of million TEU of containers throughout the year, up 2.9% from last year and accounting for 21% of the Shenzhen market. In the meantime, the Company continued to forge ahead with the Internet + Smart Port campaign to upgrade its comprehensive logistics services. In addition, the Company s eport platform, a one-stop customer service system, went online, which would connect both the upstream and downstream links for better services. (2) Bulk cargo handling business During the reporting period, China s supply-side structural reform optimized production capacity and spurred growth in imports of grain and fertilizers. During 2017, China imported 0.13 billion tons of grain, a 13.9% year-over-year increase; and 9.17 million tons of fertilizers, up 10.2% from the year earlier. By seizing market opportunities, the Company handled a total of million tons of bulk cargos throughout the year, increasing 12.7% compared to last year. With respect to grain and feedstuff handling, the Company adopted a business strategy of working on both domestic and foreign trade and successfully attracted new clients by virtue of a keen sense of the market and quality services. Meanwhile, the Company improved its port operation procedure for better efficiency and furthered cooperation with clients to satisfy their various needs. As a result, the Company s customer service quality and local influence kept improving. During 2017, the Company s grain and feedstuff throughput increased 9.4% from last year, of which the inbound data went up 13.0% on a year-over-year basis, solidifying the Company s position as a leading grain and feedstuff handling service provider, as well as priority ports for handling imported and exported grain and feedstuff, in the Pearl River Delta. As for fertilizer handling, by paying close attention to changes in the market and staying in close contact with clients, the Company handled significantly more cargos from its core clients, attracted new potash clients, restarted the bonded and re-exported calcium phosphate business which had stopped for over two years, and handled an increasing quantity of exported urea and imported pure sodium carbonate. Additionally, the Company offered customized, value-added support services to increase customer loyalty, and extended its rail-water gallery for more business opportunities. During 2017, the fertilizers handled by the Company rose significantly by 40% from last year, the compound fertilizer imports handled accounted for a 55% of the national market, and the potash imports handled took up 9% nationwide, which have further secured the Company s leading position on the market. 7

8 (3) Support services and investment management The Company s business of support tow truck, tugboat, customs clearance and barge services operated well. Earnings in this respect have risen as the Company also looked for income while ensuring the support services. Meanwhile, the Company s main joint ventures, including China Overseas Harbour Affairs (Laizhou) Co., Ltd., China Merchants Bonded Logistics Co., Ltd. and China Merchants Holdings (International) Information Technology Co., Ltd., offered slightly lower returns to the Company compared to last year. The Company s primary business results are set out as follows: Main business indicator Change Total throughput (thousand tons) 69,847 68, % Among which: Container throughput (thousand TEU) 5,374 5, % Bulk cargo throughput (thousand tons) 21,203 18, % Hours charged for tow trucks (thousand hours) 1,169 1, % Hours charged for tugboats (hour) 38,392 32, % During the reporting period, the Company carried out the tasks it had set out for the year, with its focus on lean management for the purposes of better quality and efficiency of internal management. It improved the structure of its Headquarters for a more professional division of functions, as well as for a more solid organizational and human resources structure; further strengthened budgetary and performance management for more effective internal control; made better use of its existing facilities and equipment through technical modification and procedure reform, and enhanced resource allocation assessment and asset control, which have resulted in a significantly higher ratio of resource utilization; and promoted integrated financial management to management the liquidity of each entity within the Company in a more effective way, improve the debt structure and look for the best financial outcome. 2. Outlook of the Company s future development (1) Outlook and trends of the industry In 2018, with the continuing steady recovery of the world economy, the economic operation in China is predicted to remain stable. In the future, while the inclination of the national policy towards the real economy is expected to shore up the needs for goods trade, there are some unfavorable external conditions, such as the evolution of the global trade and investment outlook and the trade protectionism raising its head. The positive trend of the shipping industry is expected to be sustained, but we need to be cautiously optimistic since the imbalance between supply and demand has not been solved from the root after going through the phased repair. The port industry has generally maintained the development tendency of advancement in steady growth, and will enter the key transformation phase from high-speed growth to high-quality development. However, the structural excess of the industrial capacity and the slowed increase of demands are becoming normal and with the market-oriented reform of the port charges, the port companies are faced with challenges in their profitability. It has become an inexorable trend for the port companies to actively seek to transform from port operators to port comprehensive service providers by making use of the Internet technology and the industrial integration opportunity. In terms of container handling, the regional container transportation demands are expected to grow moderately. Affected by factors such as the regional competition, the allied operation of shipping companies and the adjustment of the regional urban planning, the Company faces great pressure in the growth of its container business. The Company will closely follow up with the latest mergers and acquisitions of its customers, reinforce the flexibility of the business negotiations and actively secure new routes, while initiating the berth upgrading project and helping to push the expansion and dredging works of Tonggu Fairway and the construction of the public fairway in the western port area so as to improve the hardware resource conditions at the port for sustained stability of the container business. As for bulk cargo handling, regional demand for grain, feedstuff and fertilizer is expected to keep growing. The new bulk grain warehouse resource input, the bonded and transit businesses and the cultivation of new supply of goods and new business forms will bring business growth opportunities to the Company. The Company will follow closely the market and industrial policy changes and take positive business tactics. Meanwhile, it will 8

9 accelerate the upgrading of the berth and warehousing resources in Chiwan Port and the construction of the warehousing facilities in Machong Port so as to enhance the overall resource capacity and ensure the steady advancement of the business scale and the industrial position of bulk cargo handling. (2) Development strategy During the 13th Five-Year Plan period, focusing on the strategy vision of Building the Regional 1st Level s Port Integrated Service Provider, the Company sticks to the principle of Based on Main Business of Port Service, Be a Local Standard; Expand Comprehensive Service for Business Upgrade. We strive to build a company featuring excellent management, great efficiency, potential for sustained development and the ability to create constant value for its shareholders, employees, customers and the society. In the reporting period, we researched and formulated the implementation schemes for our strategic planning, proposing the 123 Development Strategy : sticking to one center - centered around innovation-driven, playing the role of two platforms - the financing platform and the investment subject platform, and well establishing three bases - the business development and innovation base, the technological support and incubation base and the talent cultivation and reservation base. The Company considers entering the ro-ro port warehousing market in the future and starting from the ro-rologistics, gradually expand the domestic and even the overseas commercial vehicle ro-ro port businesses, developing new business growth points other than container and bulk cargo handling businesses. (3) Business plans for is the first year of implementing the spirit of the 19th National Congress of the CPC. Faced with the complicated market situation in the new age, the Company will vigorously respond to the challenges and seek to achieve sound growth of its business results and profits. Our main business plans are as follows: 1) To focus on the operation of the port main business and expand the business scale advantage We will closely follow the shipping market and industrial trend changes, take positive business tactics, develop new supply of goods and new customers while maintaining the existing customers, and consolidate and further enhance our market position in the regional port. Meanwhile, we will cultivate new business forms by combining with the port main business, develop logistics value chain services and provide more breakthrough value-added supporting businesses to achieve the stable growth of our business scale and profits. 2) To optimize resource allocation and improve resource guarantee capability We will actively carry forward the construction of the Tonggu Fairway and the public fairway in the western port area, speed up the upgrading of Berth 10# and 11# in Chiwan Port and Berth 5# in Mawan Port, and improve the container navigating and berthing capabilities in the port. We will accelerate the construction of Berth 5# and 6# in Chiwan Port and the warehousing upgrading in the port, the construction of the bulk grain warehouses in Machong Port and the compound fertilizer surge bins, and improve the bulk cargo berthing and warehousing capabilities in the port. We will intensify the optimized use of stock resources and establish the collaborative sharing mechanism for the bulk cargo business resources in the two ports to fully enhance the resource guarantee capability. 3) To base on lean management and innovation to promote quality and efficiency for internal management Lean management and innovation will be pushed forward oriented by problems in the actual production and operation. We will reinforce the system construction and the talent team building to strengthen the internal management foundation; deepen the corporate culture and brand construction to enhance the Company s soft power for competition; specifically propel the major cost control, track and increase profit margins with long-term effects; expedite the application of the Internet technology in ports to improve the management quality and efficiency; focus on boosting the factorization of bulk cargo bagging, the optimization and promotion of the intelligent tally system and the establishment of the staff incentive mechanism closely related to performance. 4) To intensify the investment expansion and drive our leaping management We will keep looking for regional opportunities for resource integration and business expansion, and make use of our financing platform and brand advantage, so as to further perfect and enlarge our business layout. Meanwhile, we will adjust to the progress of the shareholders committed implementation of the horizontal competition and vigorously seek opportunities to achieve the synergistic effect of capital and business, so as to improve our integrated competitiveness and drive our leaping development. 9

10 5) Capital needs and use plan The total investment on fixed assets of the Company in 2018 is planned to reach RMB 675,460,000, of which: RMB 490,730,000 is for the investment on port warehousing projects; RMB 139,040,000 is for that on mechanical equipment and technological upgrading projects; RMB 31,420,000 is for that on information projects; and RMB 14,270,000 is for that on administrative, office and miscellaneous projects. The required funds of the above capital expenditure are mainly from the cash inflow obtained from Company s operation and the borrowings from inter-bank market and financial institutions. (4) Possible risks and countermeasures 1) External risks The external risks mainly come from the uncertainty of the macroeconomic recovery and the increasingly fierce competition among regional ports. As our main business is strongly external and the potential risk factors in the macroeconomic recovery will bring negative effects to the container shipping market and the large bulk cargo demands, we face major challenges in maintaining the stability of the port business; the port capacity supply is excessive in the Pearl River Delta, leading to worsened homogeneous competition among ports, potential risks of business segregation and increased pressure of decreasing port charge rates. Our investing companies are all in the port, logistics or the related industries and face the same business fluctuation risks, thus resulting in the fluctuation of our investment returns. We attach importance to the research and estimation of the external operating environment, intensify the business operation risk warning ability, plan in advance effective measures to actively respond to market changes and seek opportunities among challenges to strive for the stability of the core business. We will further optimize the port resource allocation, enhance our comprehensive competitiveness, reinforce our advantageous position within the region and build an industrial benchmark enterprise. Meanwhile, we will strengthen our control on investments and external expansion and balance the return risk fluctuation by expanding the business layout, innovating business models and optimizing the profiting structure. 2) Internal risks The internal risks mainly come from the increased operation costs and relatively onefold business structure. The price of such production factors as land and labor continues to rise and the port operation costs go up rigidly, causing narrowed corporate profit margins; our port loading and unloading businesses occupy a big proportion with relatively single profiting source and thus, our business extension and expansion abilities are yet to be improved. We further develop and enhance the profits of using stock resources by continuing to advance the lean management, increase our investment on scientific researches, focus on the technological innovation of techniques and reduce the labor scale to achieve improved quality, efficiency and abilities. With our existing advantages, we will base on our port main business, develop comprehensive port services and cultivate new profit growth points to gradually transform from a conventional port operator to a comprehensive port service provider. 3. Significant changes in the main business in the reporting period Yes No 4. Products contributing over 10% of the main business revenue or profit 5. Seasonal or periodic characteristics in the operating performance that need special attention Yes No 10

11 6. Significant YoY changes in the operating revenues, operating costs and net profits attributable to the common shareholders or their composition 7. Listing suspension or termination 8. Issues related to the financial report (1) YoY changes in the accounting policy, accounting estimation and measurement methods Compared with the financial statement of the previous year, the major changes in the Company s accounting policy are: On 28 April 2017, the Ministry of Finance published the Accounting Standards for Business Enterprises No Non-current Assets or Disposal Groups Held for Sale and Discontinued Operations; on 10 May 2017, the Ministry of Finance revised and published the Accounting Standards for Business Enterprises No Government Subsidies; in accordance with the issuance requirements of the Ministry of Finance, we have implemented the Standards No. 42 since 28 May 2017 and the Standards No. 16 since 12 June Implementing the Standards No. 42 does not produce effects on the Company s net loss/profits, total assets and net assets of the current and previous periods; implementing the Standards No. 16 does not product any effect on the Company s net loss/profits, total assets and net assets of the current and previous periods. (2) Retrospective restatements due to correction of significant accounting errors in the reporting period No such cases (3) YoY changes in the consolidation scope Our Company signed the Supplementary Agreement to the MEDIA PORT INVESTMENTS LIMITED Shareholder Agreement with China Merchants Port Holdings Co., Ltd. (the CMPH ), FATTEN INVESTMENTS LIMITED and MEDIA PORT INVESTMENTS LIMITED on 23 August 2017 in Shenzhen. After the signing of the agreement, our Company will realize the control and consolidation of Shenzhen Mawan Wharf Co., Ltd. ("SMW"), SMP and Shenzhen Mawan Terminals Co., Ltd. ("SMT") (together referred to as "Mawan Companies"). For more details, please see the Connected Transaction Announcement on the Signing of Supplementary Agreement to the MEDIA PORT INVESTMENTS LIMITED Shareholder Agreement (Announcement No ) that we published on on 25 August As of the end of September 2017, we had completed the director appointment for MEDIA PORT INVESTMENTS LIMITED and realized our control over Mawan Companies in form and nature. Based on the related provisions of the Accounting Standards for Business Enterprises No Consolidated Financial Statements, our Company has consolidated Mawan Companies since September 2017, and in accordance with the requirements on company consolidation under the same control, has adjusted the opening balance of the comparative financial statement and the amount of the same period for the previous year. For and on behalf of the Board Bai Jingtao Chairman of the Board Shenzhen Chiwan Wharf Holdings Limited Dated 7 March